The 2014 Annual Report and the Company's Audited Financial
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2016 ANNUAL REPORT CONTENTS MESSAGE FROM CHIEF EXECUTIVE OFFICER 1 FINANCIAL HIGHLIGHTS AND FINANCIAL RATIOS 3 COMPANY PROFILE Company History 4 Milestones 4 Mission and Vision 6 Business Relationship with Major Shareholder 6 Types of Business 7 Overseas Investment in Hotels and Resorts 12 Developments in 2016 13 Future Plans 13 Awards 16 INCOME STRUCTURE AND FINANCIAL ANALYSIS Income Structure 18 Explanation and Analysis by Management 20 ECONOMIC TRENDS : TOURISM IN THAILAND AND THE PHUKET MARKET Sales and Marketing 21 The Phuket Situation 22 Competition 23 Pricing Strategy 24 Three Year Outlook 24 CORPORATE SOCIAL RESPONSIBILITIES 25 EVENTS IN 2016 32 BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY Board of Directors 38 Management, Head of Group Internal Audit and Company Secretary of the Company 45 Details of Positions of Directors and Management 50 Information on the Directors of Subsidiaries 52 LAGUNA PHUKET MANAGEMENT TEAM 54 CORPORATE AND MANAGEMENT STRUCTURE General Information 57 Companies in which the Company’s Shareholding Exceeds 10 percent 58 Corporate Structure 60 Major Shareholders 61 Management Structure 62 Method of Appointment and Removal of Directors as Included in the Company’s Articles of Association 68 REMUNERATION Report of the Nomination and Remuneration Committee 69 Remuneration Policy 70 Remuneration and Other Benefits of the Directors during the Year 2016 71 Directors and Management’s Remuneration 72 CORPORATE GOVERNANCE 73 SUPERVISION ON THE USE OF INSIDE INFORMATION 90 RISK FACTORS 91 PERSONS WITH MUTUAL INTEREST AND CONNECTED TRANSACTIONS 93 LEGAL DISPUTE 100 REPORT OF THE AUDIT AND RISK COMMITTEE 102 OPINION OF THE AUDIT AND RISK COMMITTEE ON THE COMPANY’S INTERNAL CONTROL 104 OPINION OF THE BOARD OF DIRECTORS ON THE COMPANY’S INTERNAL CONTROL 105 BOARD OF DIRECTORS’ RESPONSIBILITY FOR THE COMPANY’S FINANCIAL STATEMENTS 106 FINANCIAL REPORTS Independent Auditor’s Report 108 Financial Statements 112 Notes to Consolidated Financial Statements 120 AUDITOR’S REMUNERATION 177 REFERENCES 178 BUSINESS LOCATIONS 179 FACILITIES 180 ABBREVIATIONS AND COMPANY NAME IN FULL MESSAGE FROM CHIEF EXECUTIVE OFFICER Message from Chief Executive Officer In 2016 we mourn with all Thai people on the passing of Thailand’s beloved King Bhumibol Adulyadej. King Bhumibol was held in the highest esteem for his pivotal role in the development of modern Thailand. His Majesty’s contributions to the happiness and livelihoods of the Thai people have been immeasurable, and he will continue to be the source of great wisdom and inspiration for many generations to come. Both Phuket and Bangkok remain to be popular international holiday destinations despite Thailand’s political issues over the years. In 2016 international tourist arrivals into Phuket and Bangkok through the airports increased 16 percent and 5 percent, respectively, over the prior year. Our 3 hotels were able to capitalize on this growth along with a renewed effort on sales and marketing to achieve a year-on-year combined revenue and profit improvement of 10 percent and 21 percent respectively. Tourism in Phuket continues to be dominated by Chinese and Russian holiday makers and the 2 markets make up a major part of Banyan Tree Phuket and Angsana Laguna Phuket’s room revenue in 2016. Phuket benefitted from a resurgence of the Russian market, which increased by 51 percent and this was largely due to the strengthening of the Ruble against the Thai Baht, and also more Russians selecting Phuket during the high season as a result of the political instability in the Middle East. Our hotels benefitted not only from more business from this source market but also from their preference of the higher room categories. Banyan Tree Bangkok’s rooms and food and beverage outlets continue to perform well with revenues improving by 10 percent and 7 percent respectively despite the decline in business during the mourning period of the late King Bhumibol Adulyadej. Overall revenue and profit of the hotel improved 8 percent and 9 percent, respectively, over the prior year (excluding extraordinary revenue in prior year). On the property sales front, we successfully launched Angsana Beachfront Residences condominiums in December 2016. At the time of writing, all the 30 units valued at Baht 1,211 million had been reserved with a deposit (7 units and 23 units in 2016 and 2017 respectively). On the back of this successful launch, a further phase of 18-24 units will be released. All-in-all, a total of 64 properties with a sales value of Baht 922 million was sold in the year. This represents an increase of 28 percent in the number of units sold as compared to 2015. At the end of January 2017 our property sales pipeline amounted to 86 units with a sales value of Baht 2,077 million which will be recognized in 2017-2019 baring any cancellations. Laguna Resorts & Hotels Public Company Limited 1 MESSAGE FROM CHIEF EXECUTIVE OFFICER At Laguna Phuket, CSR is one of the pillars of our business philosophy and in 2016 we take pride to be awarded the ACE Award (American Chamber of Commerce’s CSR Excellence Recognition) for our Greening Community Initiative that resulted in 25,000 mangrove saplings planted over the course of 10 years. In addition, Laguna Phuket also received the Thai-US Creative Partnership recognition and was the winner of the Ambassador’s Award, a special award presented by the United States Ambassador to Thailand for outstanding CSR and contribution we have made to Thai social and economic development. Laguna Phuket Associate Saving Cooperative (COOP) was awarded the 2016 Excellence Cooperative Award from the Phuket Vice Governor. The COOP is an important initiative which has helped us retain our talent by creating a work environment that supports associates to be more financially independent. Laguna Phuket first started operations in 1987 with the opening of Dusit Thani Laguna Phuket (formerly known as Dusit Laguna Resort) and in 2017 Laguna Phuket will be celebrating its 30th Anniversary. A series of events have been lined up to commemorate this auspicious occasion. As we partake in the anniversary celebrations, management is cognizant that the economic outlook in 2017 is uncertain at best and will hence focus on strengthening its core businesses and at the same time build up a strong balance sheet in preparation for any downturn in business or the global financial situation. Mr. Ho KwonPing Chief Executive Officer 2 Annual Report 2016 FINANCIAL HIGHLIGHTS AND FINANCIAL RATIOS Financial Highlights (Unit : Million Baht) Information from Consolidated Financial Statements 2016 2015 2014 Total Assets 20,725 20,091 18,714 Total Liabilities 8,040 8,416 7,306 Total Shareholders’ Equity 12,685 11,675 11,408 Revenue from Hotel Operations 3,484 3,109 3,085 Revenue from Property Development Operations 1,306 2,348 804 Total Revenue 5,342 5,658 4,050 Operating Profit 751 527 228 Share of Gain (loss) from Investment in Associate (49) (45) (36) Finance Cost (190) (166) (162) Income Tax Expenses (133) (139) (9) Non-Controlling Interests of the Subsidiaries (2) (1) (3) Profit for the Year 377 176 18 Financial Ratios Information from Consolidated Financial Statements 2016 2015 2014 Quick Ratio (Times) 0.50 0.51 0.26 Receivables Turnover (Times) 8.11 11.20 8.98 Accounts Payable Turnover (Times) 3.56 5.23 7.70 Return on Total Revenue (%) 7.12 3.10 0.45 Return on Total Equity (%) 3.12 1.52 0.16 Return on Total Assets (%) 1.89 0.90 0.10 Earnings Per Share (Baht) 2.28 1.05 0.11 Dividend Per Share (Baht) 0.38* 0.36 0.125 Net Asset Value Per Share (Baht) 76.10 70.04 68.44 Weighted Average Number of Ordinary Shares 166,682,701 166,682,701 166,682,701 * On 10 August 2016 the Board of Directors approved the interim dividend payment of Baht 0.12 per share. At the time of printing this report, the Board of Directors proposed the annual dividend of Baht 0.26 per share but it is subject to the approval of the Annual General Meeting. Laguna Resorts & Hotels Public Company Limited 3 COMPANY PROFILE Company History Laguna Resorts & Hotels Public Company Limited (The Company) was founded in 1983. It shortly thereafter acquired a large parcel of land on the site of an abandoned tin mine at Bangtao Bay, Phuket, Thailand which was later developed to become the Laguna Phuket integrated resort complex. Major businesses of the Company and its subsidiaries (The Group) are hotel business and property development. The subsidiaries also engage in operating a golf club, sales of merchandise, office and resort rental and sales of holiday club memberships. Milestones 1987 Dusit Thani Laguna Phuket (formerly known as Dusit Laguna Resort) opened. 1991 Laguna Beach Resort opened. 1992 Sheraton Grande Laguna Phuket and the Laguna Phuket Golf Club opened. 1993 The Company listed on Stock Exchange of Thailand. Property Sales operations commenced with the Allamanda condominium units. 1995 The resort’s flagship hotel, Banyan Tree Phuket’s Grand Opening. 1998 Laguna Holiday Club commenced operations. 2002 The Group acquired a large parcel of land adjacent to Laguna Phuket for future development opportunities. 2005 The Group acquired Thai Wah Plaza Limited which owns Banyan Tree Bangkok and commercial offices. 2006 Banyan Tree Lijiang, People’s Republic of China and Laguna Holiday Club Phuket Resort opened. The latter is operated under the Holiday Club Business. 2008 The Group entered into an agreement to acquire additional land adjacent to Laguna Phuket for future development. 2009 The Group invested in the Banyan Tree Indochina Hospitality Fund which has developed an integrated resort in Hue, Vietnam. Outrigger Laguna Phuket Resort & Villas commenced operations in December. 2010 Divestment of Dusit Thani Laguna Phuket Hotel in October.